OPEC President: Members Agree on Sizable Crude Output Cut
While a production cut seems imminent from the cartel’s members, what the Russians will do remains to be seen.
Organization of Petroleum Exporting Countries (OPEC) President Chakib Khelil said that all the cartel’s members are in support of a production cut at this week’s meeting in Oran, Algeria. He also expressed confidence that Russia, the largest non-OPEC member, will assist in the propping up of prices.
“Everybody is supporting a cut – I don’t have any doubt about it,” said Khelil.
OPEC Secretary-General Abdullah al-Badri stressed the need to make a major cut when he met with reporters today on his arrival in Algeria. “Stocks are very high, we have about 100 million barrels of oversupply in the market, we have to take them out,” he said. “We have to act – we see a very sizable reduction.”
OPEC, which agreed two months ago to reduce production by 1.5 million barrels a day from Nov. 1, has implemented 75 percent of the cut, said Khelil, who is also Algeria’s oil minister.
Vagit Alekperov, Chief Executive Officer of Russia’s largest non-state oil producer OAO Lukoil, said today OPEC is asking Russia to cut oil output by between 200,000 and 300,000 barrels a day. Alekperov and Russia’s Deputy Prime Minister Igor Sechin are attending Wednesday’s meeting.
“We expect concrete support from them” said Khelil of the Russians. “We always wanted them to join OPEC.”
There’s been speculation recently that the Russians would be joining OPEC in some formal capacity. The high ranking of some of Russia’s delegation making its way to Algeria has raised such a possibility.
“I hope the importance of their delegation is a measure of the importance of the decision they’ll announce,” said Khelil.
Iran, OPEC’s second biggest producer, said it will propose a cut of between 1.5 million to 2 million barrels per day in Oran. If oil remains below $80, Iran will have to cover a major budget deficit.
Everyone is expecting a major cut, something that will ‘shock’ the market when it happens. But even so, the loss of production will hurt the oil producing countries too. Petroleum analyst Mike Ala of the Imperial College London, told the Voice of America that the loss of production is nonetheless a concern for producers.
“I mean, in the case of Iran, the 2nd largest producer in OPEC, 2nd exporter, its share of the cut-back in November was 200,000 barrels a day. Saudi Arabia’s share was about 450,000 barrels a day. And, these countries can’t go on cutting production because they do need the revenues for their development projects,” he said.
OPEC will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg.